Economic recovery gathers pace as construction, finance drive 5.1% GDP growth in the first quarter of 2026, as Sri Lanka’s post-crisis rebound broadened across multiple sectors, supported by strong construction activity, expanding financial services and rising investment-related imports.
Economic recovery gathers pace as construction, finance and services boost first-quarter growth
According to data released by the Department of Census and Statistics, Sri Lanka’s economy grew by 5.1 percent year-on-year during the January-March period, extending the recovery momentum seen over the past two years. Gross domestic product (GDP) at constant 2015 prices increased to Rs.3.65 trillion from Rs.3.48 trillion recorded in the corresponding quarter of 2025.
At current market prices, GDP rose by 11 percent to Rs.9.16 trillion, reflecting both real economic expansion and higher nominal economic activity.
The latest growth figures indicate that Sri Lanka’s economic recovery is becoming increasingly broad-based, moving beyond a limited number of sectors and spreading across construction, manufacturing, financial services, information technology and tourism-related industries.
The economy maintained its growth trajectory despite challenges during the quarter, including the lingering impact of Cyclone Ditwah and growing geopolitical tensions in the Gulf region. Domestic production activity remained resilient, helping sustain overall economic performance.
One of the notable developments during the quarter was a sharp increase in imports, which expanded by nearly 20 percent compared to the same period last year. Importantly, the rise was driven largely by demand for capital goods and intermediate goods rather than consumer products, suggesting that businesses were investing to support production and future growth.
The increase in imports was particularly linked to construction activity, goods transportation and passenger transport services. This trend points to rising investment activity across the economy and signals growing confidence among businesses. Higher imports also contributed to stronger government revenue collection through import-related taxes.
The industrial sector emerged as the strongest contributor to growth, recording a robust 7.2 percent expansion. Construction activity was the standout performer, surging 16.3 percent year-on-year as infrastructure projects and private-sector developments gathered pace.
Mining and quarrying activity also posted a significant 19.5 percent increase, reflecting higher demand for raw materials used in construction and development projects. Meanwhile, manufacturing output grew by 2.8 percent, supported by gains in chemicals and pharmaceuticals, metal products, non-metallic mineral products and food processing industries.
However, some export-oriented manufacturing segments continued to face challenges. Textile and apparel production, rubber and plastic products, and machinery manufacturing recorded weaker performances amid ongoing global demand uncertainties and competitive pressures in international markets.
The services sector, which accounts for the largest share of the economy, expanded by 3.4 percent during the quarter, improving from 2.7 percent growth recorded a year earlier.
Among the strongest performers within services were insurance activities, which grew by 22 percent, reflecting increased economic activity and a larger vehicle fleet. Information technology services also maintained strong momentum, with IT programming and consultancy services expanding by 16.1 percent.
Financial services recorded a healthy 12.8 percent increase, benefiting from increased business activity and a relatively lower interest rate environment during much of the period. The strong performance of financial institutions highlights improving credit conditions and rising economic transactions across sectors.
Tourism-related industries continued their recovery, with accommodation and food service activities growing by 5.4 percent. The sector has benefited from improving visitor arrivals and stronger tourism spending, contributing to broader service-sector expansion.
In contrast, agriculture remained the weakest-performing major sector, recording growth of just 1.1 percent. While coconut cultivation and several crop segments registered positive growth, declines in tea, rubber, rice, fisheries and livestock production weighed on overall agricultural output.
The contraction in tea cultivation remains a concern, given the industry’s importance as one of Sri Lanka’s key export earners. Production challenges, weather-related factors and structural issues continue to affect performance in the sector.
Overall, the first-quarter results suggest that Sri Lanka’s recovery is gaining strength and becoming more diversified. The combination of rising investment activity, stronger industrial output, expanding financial and technology services, and continued tourism growth points to improving economic fundamentals. While external risks and sector-specific challenges remain, the broad-based nature of the current expansion provides encouraging signs for the country’s growth outlook in the remainder of 2026.